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Deutsche Bank upgrades Direct Line to ‘buy’

Analysts said in a note the share price has “more than reflected” pressures and is now set to grow with the new strategy

Direct Line - Deutsche Bank upgrades Direct Line to ‘buy’
The insurer released a strategy review last week

Direct Line Insurance Group PLC (LON:DLG) shares perked up after Deutsche Bank upgraded the stock to ‘buy’ from ‘hold’ and revised the target share price to 350p from 335p.

The investment bank is more confident that the market's opinion about the FTSE 250-listed company is going to improve following the trading update and strategic review last week.

READ: Direct Line puts the pedal to the metal on cost-cutting

The insurer said it will improve its operating expense ratio to 20% by the end of 2023, with one-off restructuring costs anticipated to come in at £120mln, as well as reducing annual capital expenditure to less than £100mln from 2022 onwards.

Deutsche analysts said in a note the share price has “more than reflected” pressures such as increased competition, lower reserve releases and weaker investment returns, which have been denting profits.

While the shares "have lacked a positive catalyst to justify a turn", they now believe that this positive spark is "closer than previously assumed".

Shares were up 2% to 301.8p on Monday at noon.

Quick facts: Direct Line

Price: 331.8 GBX

Market: LSE
Market Cap: £4.56 billion

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